you're watching "nightly business report" for tuesday, september 7. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> tom: good evening, everybody, and thanks for joining us. too little too late. susie, that's the initial reaction from some business leaders to president obama's latest proposal to give tax breaks for businesses.

>> susie: tom, the president will detail the plan tomorrow in cleveland. he's proposing that companies write off 100% of their investments in plants and equipment through next year. >> tom: the administration estimates the plan would cut business taxes by about $200 billion over the next two years. for some businesses, this "expensing" proposal could amount to a half-off sale on new equipment. darren gersh reports. >> reporter: you've probably heard about all those businesses sitting on their money, waiting for things to get better. the president's expensing plan could give executives an incentive to make a big purchase, says small business advocate todd mccracken. >> and what that does is it uses up a lot of extra cash that especially a lot of big companies seem to have right now bur that they're not using, they're not investing. and that has the potential to create jobs. >> reporter: but business groups are lukewarm on the proposal the president is expected to announce tomorrow, because they are worried about paying for it,

meaning with tax increases on top of rate hikes expected when the bush tax cuts expire at the end of the year. >> it winds up being somewhat neutral position-- that you're incenting companies over here to do something, and in turn disincenting companies over here from doing something else. and then it winds up being something of a wash, economically. >> reporter: progressives like economist dean baker worry expensing misses the point. the real problem he says is a lack of jobs, not equipment. >> investment in equipment and software has actually been growing at a 20% rate for the last three quarters. so i don't think there's all that much to be gained pushing on the investment side. i mean, more investment would be great, but i just don't think there's much opportunity there. >> reporter: republicans have been enthusiastic supporters of business expensing in the past. but former bush administration economist phillip swagel says they are unlikely to rally around president obama now. >> it's just out of synch with the rest of his agenda, and what the economy really needs is more clarity on the rest of his agenda.

so businesses don't know what their taxes, their health costs, their energy costs, regulation. >> reporter: add to that another issue-- congress will have just a few weeks to consider the president's latest proposal before heading out to campaign, making the fate of his expensing proposal uncertain at best. darren gersh, "nightly business report," washington. >> susie: here are the stories in tonight's n.b.r. newswheel: stocks fell on new concerns about the health of european banks. tom will have details in tonight's "market focus." the dow lost 107 points, the nasdaq was down almost 25, the s&p off 12. volume was light-- just under 830 million shares traded on the new york stock exchange; 1.7 billion shares moved on the nasdaq. hewlett packard is suing former c.e.o. mark hurd to stop him from joining rival oracle. hurd was hired there yesterday. now, the lawsuit claims hurd could use what he knows about h- p and its trade secrets to help oracle and harm h-p. hurd signed a confidentiality agreement as part of his $40

million severance package with h-p. no comment from hurd or oracle. and the s.e.c. may impose new rules on high frequency traders after may's "flash crash." chairman mary schapiro says her agency is taking a close look at large numbers of rapid-fire trades made on may 6. speaking to a group of business leaders in new york, she said a final report will be completed by the end of this month. >> tom: still ahead, tonight's "word on the street" is "innovation." we'll look at three firms outside the tech world making a profit by innovating. here's a hint-- one is the largest employer in america. >> susie: in state capitals and city halls across the country, major budget battles are underway. tax revenues continue plummeting as property values remain low, unemployment is high, and consumers aren't shopping. all week, we're looking at how state and local governments are dealing with the cash crisis in a series we call "budget blues."

tonight, we focus on california. the golden state has come to symbolize the budget crisis. its massive deficit-- $19 billion-- is bigger than any other state. nearly 150,000 state workers have been furloughed. tomorrow, its supreme court hears arguments on whether the unpaid days off are legal.

>> tom: we haven't had had those headlines in focus here for better than a month. let's get everybody updated, susie with tonight's "market focus." officially, september is almost a week old, but for investors, september really began today, and is living down to its reputation. historically, this month is the worst performing month for investors. the s&p 500 started weak over renewed worries about europe. the index closed near to its low, down more than 1%. selling of financial stocks was driven by concerns of european banks. the financial select e.t.f. gave up a share of the rally investors saw last week. among the weakest of the big financial stocks comes with an american name. american express was the worst performing dow industrial component, off 4%. the stock remains above its june low of about $37, which was also

its low in february. regional banks saw selling, too. marshall and iisley from milwaukee dropped more than 5%. m&t bank in upstate new york saw a big volume increase in its sell-off. m&t has been the target of take- over speculation. regions financial from alabama fell more than 4%. regarding those european bank worries, "the wall street journal" reported the stress tests in july allowed banks to leave out some of their government bond investments. british bank barclays fell almost 6%. according to "the journal," barclays did not include some government bonds it holds for trading. separately, the bank also announced american bob diamond will be promoted from investment banker to c.e.o. in march. he spearheaded barclays purchase of most of lehman brothers when it collapsed two years ago. investors focused on other personnel changes, too. oracle was the biggest percentage gainer of the s&p 500. as we mentioned, former hewlett- packard c.e.o. mark hurd will join the company. oracle shares saw rallied almost 6% on heavy volume. tonight, it's at its highest price since early august.

hurd joins oracle as co- president, replacing charles phillips. hurd also gets a seat on oracle's board of directors, bringing with him technology hardware experience. earlier this year, oracle completed its buyout of sun- microsystems, moving oracle into the computer server business. hurd also has overseen several big deals, including h-p's latest buyout of palm. shares dropped 1% today. as we mentioned, h-p has sued its former boss, claiming he won't be able to perform his duties at oracle unless he discloses confidential information about hewlett- packard. merger talk didn't take labor day off; it was just delayed one day. convenience store operator casey's hit another new high. it has an offer on the table for $38.50 per share, but says a new bidder has come forward at $40 per share. the market is looking for more with the stock above $42. an $8 billion deal in natural gas-- enterprise g.p. will be bought by another pipeline company, enterprise products, for over $57 per share.

finally, idenix pharmaceuticals is half the size it was last week. shares lost almost 50% after the f.d.a. put its hepatitis-c treatments on hold. with today's drop, the stock is back to where it was a year ago. and that's tonight's "market focus." we're happy now joining us live from san francisco, bill lockyer, california's state treasurer. good you could come back on the program. >> thank you, susie. >> susie: it is now day 69, and california still does not have a budget. what happens next? >> well, we continue to negotiate, i hope, between the governor and

legislators and both parties. we're one of the three states that require two-thirds vote to adopt a state budget. we've had these deficits that you mentioned. we're one of 16 states that have had deficits in excess of 20% of the general budget. it is hard to make up that hole. it means cutting education, cutting health care, university, and other things. and a lot of resistance from people that don't like those layoffs and cuts, and, of course, resistance to a tax increase that would help close the gap. >> susie: now, you heard our program at the very top, where we were talking about president obama proposing these tax breaks for businesses. would something like that work in the state of california to improve the financial situation? >> well, we certainly need to have some economic stimulus. you know, the suggestion that when the car is skidding into the ditch, that you should hit the

brakes, rather than get control and accelerate makes no sense. so, whether it is stimulated spending like public works that is needed, and trying not to layoff firefighters and teachers, as well as a business tax incentive. my personal thought, of course, is don't increase the dividend taxes at the end of the year, and have a payroll holiday for a couple of years on employee taxes on payroll. i would think those would be a higher priority, if they're affordable. >> susie: now, looking at the labor market in california, the state ranks number three with one of the highest unemployment rates, 12.3%, after nevada and michigan. with manufacturing in decline and with home construction collapsing, where are the jobs going to come from? >> well, in our state, because it's so diverse -- you know, it is not just silicone valley and hollywood. it is agriculture,

tourism, trade, financial services, as well as the normal retail-type work. so there can be a broad recovery when it happens. we were creating jobs a decade ago largely in the home construction area. and when the bottom fell out of that, when the bubble burst, of course, it has caused a terrific downturn. we could do public work stimulus temporarily, but it is going to take a while to get back. >> susie: i understand, bill, you were one of a group of associates that techla to take over a plant that was going to be closed for making hybrid vehicles. do you see other opportunities where you could replicate something like this that would generate jobs in the state? >> i hope so. we have a new law that allows me and others to waive sales taxes on new manufacturing equipment for things like the green

car, the electric car, the solar industry, and so on. while that saves, if you're investing $100 million, it saves $10 million from that cost. we hope to continue to be a hub of green transportation and green energy in our state. >> susie: now, bill, you have been dealing with california's financial problems for years, both as a state legislator, and now as a state's treasurer. when you look at the situation the state is in now, how would you compare it to the past? how bad is the financial crisis in california? >> well, our state spending levels are now the equivalent of what they were a dozen years ago. and that's despite the fact that there has been inflation and population increases over that dec -- decade plus. so it is tough. we're seeing little improvement in the job

market, where there were about a million californians who have lost their job in the last couple of years. we're seeing shrinkage in the public sector, teachers and others being laid off in unprecedented numbers. >> susie: you know california is not alone. we'll be covering more of those stories later this week. thank you so much for coming on the program tonight. we appreciate it. we've been speaking with bill lockyer, a state treasurer for california. >> tom: in stark contrast to california, virginia has a budget surplus. republican governor bob mcdonnell calls his state the most business-friendly in the country. mcdonnell says low taxes and limited regulation are the keys to virginia's success. but the state also benefits from federal defense spending. while the governor thinks uncle sam should tighten the purse strings, he says protecting the country is a worthwhile investment. >> it really is about what the priorities are. do we want to spend more on entitlements and social programs and any number of other things? have health care reform that's

in the trillions of dollars long-term? a $1.7 billion un-funded mandate on virginia? is that where the spending ought to go? or in a dangerous world with a fair number of people who disagree with america abroad, do we still need to maintain a fair level of defense spending? i think that's a prudent expenditure. >> tom: the complete interview with governor mcdonnell can be found on the n.b.r. web site at "nightly business report" on pbs.org. and stay tuned tomorrow for our continuing series, "budget blues." we'll look at the cuts facing cities and counties in south florida after the housing market collapsed.

>> tom: the latest white house effort to jump-start the economy focuses on business spending, including tax credits for research and development to fuel new innovations. but r&d isn't confined to high- tech companies. tonight's "word on the street" is "innovation." glenn hall is the editor in chief at the street.com. he joins us from the nasdaq. >> tom: glenn, welcome to "nightly business report." >> glad to be here, tom. >> tom: so draw the thread for us. how can investors be certain that a company's innovation leads to profit for the company and thusly to shareholders. >> if they get it right, consumers and other purchasers love what they have and keep buying. and the example is apple. they keep bringing out the great products. if you look at their numbers, profit was about $2 billion in 2006. and it is about $8 billion as of last year. the numbers add up, and the share price from 50 to 250 in that timeframe.

>> tom: what is interesting about the list you brought along with you tonight is it is an non-technology list of innovators. beginning with wal-mart. innovation versus consumer spending. it is it consumer spending that cowbts at w.m.t.? >> i wanted to look at how innovation affects regular companies, like a retailer like wal-mart. the idea is wal-mart has gone green. the innovation factor is based on the top 50 most innovative companies. wal-mart rated very high because it is investing in sustainable effort. it is very ambitious, and if it works, consumers may buy more. >> tom: it has a big pulpit to do it from, being the largest retailer. and you highlight pg&e, it

is an old school utility company. the stock close to a 52-week high. >> talk about boring utilities, right? they have been spending a lot of money investing in new energy. part of it is required by law in california, but part of it is good use of their funds. they supply power to about 5% of the people in america, and they consume only 1% of the resources to do that. and the fun thing about this company is they're going into space. they put some money behind a start-up company that is going to put solar panels in space and pipe the energy back down to the planet. >> tom: talk about r & d out of this world. and nike is on your list. this is clearly the shoe company. expects to grow revenue by more than 40% over the next four years. $74 a share. what is the innovation here, in material costs? >> nike is a pretty interesting company when it comes to innovation.

they went through a period where they can considered a little boring. but the c.e.o. now came in as a designer and a marathon runner. he cares about performance, but he is also an art collector and he cares about the style of the shoes. you can go in and be trained and fitted for the exact right running shoe for you. they put a lot of money into innovating on the product side, and they opened up their r & d to other companies, when nike has invented less toxic rub bee. it is a little of an environmental theme here. >> tom: how about disclosures for these three, glenn? >> the street editors and reporters don't own any individual stocks. >> tom: do you wear nikes? >> i don't have any nikes in my closest. >> tom: you can read glenn's article, and you catch it a thestreet.com, and a link to it on our website as

well. it is glenn hall, he is with thestreet.com. >> susie: here's what we're watching for tomorrow: the federal reserve releases its beige book survey of regional economic conditions. weekly mortgage applications are due out as well. also, tech takeovers. our "street critique" guest expects buyouts to continue in the technology sector. he's mark watson, c.e.o. of keel asset management. we'll find out what stocks he's buying. boeing is making big changes in how it makes planes for the military. the aircraft maker is shrinking its military business from six units to four, and cutting 400 jobs in the process. boeing is facing growing pressure from the pentagon and other customers to cut costs. so far this year, boeing's military aircraft division brought almost $7 billion in revenue. >> tom: the man charged with figuring out why washington mutual collapsed says he needs more time to finish his work. wamu's collapse was the biggest bank failure in u.s. history. the court appointed examiner,

joshua hochberg, faced an october 8 deadline to wrap up his probe. he now wants that deadline moved to november 1. hochberg must decide what assets and legal claims wamu shareholders could have in the wake of the bank's failure two years ago. euqutuuuu b@

>> susie: longer days for less pay. that's what many americans are facing at work these days. tonight's commentator has some thoughts about the current state of the u.s. workforce. he's daniel gross, senior editor at "newsweek." >> the long labor day weekend, a respite we enjoy thanks to the rise of labor activism in the 1880s, is a good time to reflect on the state of working america. the flow of data in recent weeks suggests that management continues to enjoy the upper hand over labor, a dynamic that may be hindering the recovery. despite sluggish top line growth, corporate america is doing just fine. corporate profits in the second quarter checked in at a record $1.64 trillion annual rate, up 39% from the second quarter of 2009. the same can't be said of employees. by now, the decline of organized labor is a twice-told tale. only about 12% of u.s. workers are represented by unions.

but the rest of us-- call it "disorganized labor"-- aren't doing so hot, either. last friday's bureau of labor statistics report showed a 9.6% unemployment rate, and millions of people underemployed. it also found that, in the past year, as corporate profits have rebounded, average hourly earnings rose a measly 1.7%. and a report released by the kaiser family foundation last thursday found that, in 2009, employees absorbed all the higher costs of health insurance premiums, while employers didn't boost their contributions at all. to a large degree, higher corporate profits are coming at the expense of workers. nearly a century ago, henry ford introduced the five-dollar day. the theory was that companies should pay workers enough to afford to buy their products. that's a history lesson today's c.e.o.s would do well to heed. i'm daniel gross. >> tom: a lot more anxiety for many american households. >> susan: we can all relate to that, can't we,

tom. >> tom: that's "nightly business report" for tuesday, september 7. i'm tom hudson. good night, everyone, and good night to you, too, susie. >> susie: good night, tom. i'm susie gharib. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:

this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> more information about investing is available in: to order this dvd, call 1-800- play-pbs or visit online at shoppbs.org. >> be more. pbs.